Yet more misery for Spanish housing market
Just when you thought things couldn’t get any worse for Spain’s ailing construction and property industries, the National Statistics Institute (INE) revealed that prices on new build properties had dropped by an incredible 8.5 percent in the final quarter of 2011. It is the worst quarterly drop since the INE started recording the data in 2007.
This coupled with a fall of used homes by 13.7 percent during the same quarter means that overall house prices fell by 11.2 percent at the end of 2011.
House prices in Spain are now down by more than 20 percent from their 2007-2008 peaks and evidence points that they may well drop further to more than 30 percent. High unemployment, debt-laden households and limited access to credit are proving the biggest obstacles to kick starting the country’s flagging property market.
According to the Wall Street Journal, Spanish banks now possess more than €400 billion worth of construction and real-estate sector loans which amounts to the equivalent of 40 percent of Spain’s gross domestic product. Little wonder then that last month Spain’s Finance Minister Luis de Guindos unveiled a plan that will force banks to set aside €50 billion this year to cover losses accumulated from bank loans gone bad.
Demand in Spain’s property sector continues to be sluggish too, with INE data reporting a 26 percent annual decline in sales throughout 2011. Last year 361,000 homes were sold in Spain, a figure that is less than half the number sold in 2007. According to consultants Ernst & Young this lack of demand could keep house prices falling for the next three years.
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